Roo Wyda and other entrepreneurs are using crowdfunding campaigns to get feedback about their productsBen Nelms
Roo Wyda had a plan to manufacture rain gear out of fabric made from recycled plastic.
"My initial idea was to make dog rain ponchos," says Ms. Wyda, who owns a Vancouver-area business called Treehugger Brands.
But she was worried – she didn't know the pet apparel market. After building a successful company selling waterproof bedding and underwear for young children, kids' products were something she knew well.
Ms. Wyda made a prototype of a child-sized poncho and took her daughter to a local park to see how it held up.
"As we were out there testing it, people were stopping us and asking about it," she says. "They would always ask if we were making adult versions, too. Was this a sign of demand? Or just conversation?"
To gauge demand, Ms. Wyda used the crowdfunding site Kickstarter, launching a fundraising campaign where backers could choose a dog, child or adult poncho.
She's not alone – a growing number of entrepreneurs are using crowdfunding campaigns and other new techniques to test the waters for new products and businesses.
It's a smart move, says Paul Cubbon, a professor at the University of British Columbia's Sauder School of Business in Vancouver. "It's not a guarantee. But it has provided another opportunity to validate," he says.
According to Prof. Cubbon, these strategies allow businesses to move quickly and with more confidence, sure that they're "not going to waste years building the wrong thing for the wrong people."
A successful crowdfunding campaign can also create "certainty around the brand," which can be leveraged with investors and suppliers, Prof. Cubbon says.
That wasn't a priority for Ms. Wyda. In fact, she had secured traditional financing before looking at Kickstarter. "The point of this was to get the feedback."
While Ms. Wyda didn't meet her fundraising goal, she says the campaign garnered enough support to convince her there was a market for all three ponchos.
Her next step was to start selling Roo Rain Gear (she says the name is a reference to the kangaroo-influenced front pocket – not her first name) on Steal Network, a deal-of-the-day site aimed at mothers of young children. She says it allowed her to start gathering feedback from actual customers before selling through larger channels such as Amazon.
Group-buying websites can be a good way to validate a product or a new product configuration, says David Soberman, a professor of marketing at the University of Toronto's Rotman School of Management and the Canadian national chair of strategic marketing.
"You're getting reliable information because people are buying it," he says.
However, he warns that businesses have to be careful when they test products in public because competitors can see them. Businesses using group-buying sites to gauge interest also need to be sure that customers aren't just responding to the steep discounts, Dr. Soberman says.
Still, these strategies can give small businesses more information than they ever had before, and that information comes at a much lower price, he says.
"If you were a small business you used to have to create an idea base on a gut feeling," Dr. Soberman says, and "throw it against the wall to see if it sticks."
But these strategies also mean being open to change.
Chase Ellestad says he launched a Kickstarter campaign to see whether his idea for a minimalist wallet "had legs" because he wasn't sure whether the feedback he got from friends was unbiased. The campaign worked – almost 800 people pre-ordered his Tribe Wallet, committing more than $60,000.
The success wasn't a surprise. "I spent two years planning this," Mr. Ellestad says, adding that he studied successful Kickstarter campaigns.
Even with the planning, he was still open to change. When people told Mr. Ellestad there was too much writing on the wallet, he polled his supporters and changed his branding.
"That's a big one, because that's the direction of the company."
Even the smartest validation tactics take effort, Prof. Cubbon says.
"There's no free lunch. You can't just say, I'm here, gimme."
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